At the Financial Times’ recent Crypto and Digital Assets Summit, the director of the FBI’s National Cryptocurrency Enforcement Team (NCET), Eun Young Choi, acknowledged that “We are seeing cryptocurrency and digital assets really touch every aspect of criminal activity we investigate.” This includes illicit actors across a very broad spectrum of activity, everything from ransomware to narcotics smuggling to rogue states to terrorist financing. Cryptocurrency is now increasingly the preferred means of carrying out their dirty business.
This op-ed is part of CoinDesk’s State of Crypto Week, sponsored by Chainalysis. Evan Kohlmann is the CEO of Cloudburst Technologies, a New York-based startup venture aimed at detecting and thwarting digital currency fraud.
The reason these actors have settled on cryptocurrency as a medium is hardly difficult to divine: digital currencies offer unprecedented pseudonymity and cash-out opportunities that simply do not exist within the highly-regulated SWIFT banking system. People can use crypto networks without any personal identifiers attached to their “accounts.” By building the Web3 financial universe, we have moved from a world with nearly perfect data to almost none. Nor has the open source nature of the blockchain been in and of itself enough to prevent market corruption.
Currently, without the use of expensive blockchain tools that many countries and agencies cannot afford, investigators are mostly relegated to running searches for anonymous digital wallet addresses in the blockchain and hoping to find transaction matches. There are a variety of reliable blockchain explorers available such as Chainalysis, TRM Labs, Elliptic and CipherTrace – but even if one finds a match through such a search, transaction data can be an awfully shallow pool if you are looking to answer the kind of critical questions that typically underscore a criminal investigation: the who, what, how, where and why.
Many of the critical pieces that can help unravel a criminal scheme and identify the personas involved can be gleaned from traditional Web2 cyberintelligence sources, including mediums like Telegram and Discord
In the words of Coinbase’s Special Investigations Team, “Unless you own an address yourself, it is very difficult to say with absolute…
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